The impact of biomass energy consumption on pollution: evidence from 80 developed and developing countries

Abstract

The aim of this research is to explore the effect of biomass energy consumption on CO2 emissions in 80 developed and developing countries. To achieve robustness, the system generalised method of moment was used and several control variables were incorporated into the model including real GDP, fossil fuel consumption, hydroelectricity production, urbanisation, population, foreign direct investment, financial development, institutional quality and the Kyoto protocol. Relying on the classification of the World Bank, the countries were categorised to developed and developing countries. We also used a dynamic common correlated effects estimator. The results consistently show that biomass energy as well as fossil fuel consumption generate more CO2 emissions. A closer look at the results show that a 100% increase in biomass consumption (tonnes per capita) will increase CO2 emissions (metric tons per capita) within the range of 2 to 47%. An increase of biomass energy intensity (biomass consumption in tonnes divided by real gross domestic product) of 100% will increase CO2 emissions (metric tons per capita) within the range of 4 to 47%. An increase of fossil fuel consumption (tonnes of oil equivalent per capita) by 100% will increase CO2 emissions (metric tons per capita) within the range of 35 to 55%. The results further show that real GDP urbanisation and population increase CO2 emissions. However, hydroelectricity and institutional quality decrease CO2 emissions. It is further observed that financial development, foreign direct investment and openness decrease CO2 emissions in the developed countries, but the opposite results are found for the developing nations. The results also show that the Kyoto Protocol reduces emission and that Environmental Kuznets Curve exists. Among the policy implications of the foregoing results is the necessity of substituting fossil fuels with other types of renewable energy (such as hydropower) rather than biomass energy for reduction of emission to be achieved.